During the year to end-Q1 2012, the price index for all resale apartments in Russia rose by 7.88% (3.86% inflation-adjusted), the fastest annual growth since Q1 2009, based on figures released by the Federal State Statistics Service (Rosstat).
In Moscow, the capital, the price index for resale apartments increased by 4.02% (0.15% inflation-adjusted) in Q1 2012 from the same period last year.
On the other hand, in St. Petersburg, the country’s second largest city, the price index for resale apartments dropped by 0.74% (-4.43% inflation-adjusted) over the same period.
Russia had a massive housing boom from 2000 to 2007, with secondary market prices skyrocketing by 436% while primary market prices rose 362%. Property prices started to weaken in late-2008, and began falling in the second quarter of 2009. During 2011, the average price of new apartments dropped 9.3% to RUB43,686 (US$1,347) per square meter (sq. m.), 16.8% down on the peak of RUB52,504 (US$1,619) per sq. m. seen in 2008. Likewise, the average price of apartments in the secondary market dropped by 19.6% to RUB48,243 (US$1,488) per sq. m. by end-2011.
In 2011, the total area of residential housing constructed in Russia increased 6.7% to 62.3 million sq. m. from the previous year, based on figures from Rosstat. The total area of housing stock in the country was about 3.3 billion sq. m. in 2011.
According to the Land Code of 2001, private ownership of land properties is allowed for both locals and foreigners. The legislation was extended to Moscow in January 2006.
In Moscow, the capital, the price index for resale apartments increased by 4.02% (0.15% inflation-adjusted) in Q1 2012 from the same period last year.
On the other hand, in St. Petersburg, the country’s second largest city, the price index for resale apartments dropped by 0.74% (-4.43% inflation-adjusted) over the same period.
Russia had a massive housing boom from 2000 to 2007, with secondary market prices skyrocketing by 436% while primary market prices rose 362%. Property prices started to weaken in late-2008, and began falling in the second quarter of 2009. During 2011, the average price of new apartments dropped 9.3% to RUB43,686 (US$1,347) per square meter (sq. m.), 16.8% down on the peak of RUB52,504 (US$1,619) per sq. m. seen in 2008. Likewise, the average price of apartments in the secondary market dropped by 19.6% to RUB48,243 (US$1,488) per sq. m. by end-2011.
In 2011, the total area of residential housing constructed in Russia increased 6.7% to 62.3 million sq. m. from the previous year, based on figures from Rosstat. The total area of housing stock in the country was about 3.3 billion sq. m. in 2011.According to the Land Code of 2001, private ownership of land properties is allowed for both locals and foreigners. The legislation was extended to Moscow in January 2006.
Analysis of Russia Residential Property Market »
RENTAL YIELDS
Last Updated: Jun 21, 2012
In Moscow, the average price per square metre ( sq. m.) of an apartment in an elite neighbourhood runs to around EUR 11,000 to EUR 15,000. EUR 10,000 will barely buy you a sq. m. even in the smallest apartment. And Moscow prices continue to push upwards.
Rents also continue to rise. Apartments in the centre now rent on average for EUR 40 to EUR 48 per sq. m. per month, compared with last year's EUR 35 to EUR 43. In terms of yields, the picture remains much the same - apartments of all sizes in Moscow earn poor rental yields, ranging from around 3.50% to 4.50%.
In St. Petersburg, apartments cost around EUR 4,000 to 6,000 per sq. m. Bigger apartments tend to cost more, for example, a 200 sq. m. apartment costs on average EUR 5,500 per sq. m. while a 65 sq. m. apartment costs on average EUR 3,700 per sq. m.
Renting an apartment in St. Petersburg costs from EUR 22 to EUR 23 per sq. m. per month. This means that you can rent a 120 sq. m. apartment for around EUR 2,700 per month.
Gross rental yields in St Petersburg range from a good rate of 7.49% for 65 sq. m. apartments, while bigger St Petersburg apartments earn less, with rental yields of around 4.80%.
Rents also continue to rise. Apartments in the centre now rent on average for EUR 40 to EUR 48 per sq. m. per month, compared with last year's EUR 35 to EUR 43. In terms of yields, the picture remains much the same - apartments of all sizes in Moscow earn poor rental yields, ranging from around 3.50% to 4.50%.
In St. Petersburg, apartments cost around EUR 4,000 to 6,000 per sq. m. Bigger apartments tend to cost more, for example, a 200 sq. m. apartment costs on average EUR 5,500 per sq. m. while a 65 sq. m. apartment costs on average EUR 3,700 per sq. m.
Renting an apartment in St. Petersburg costs from EUR 22 to EUR 23 per sq. m. per month. This means that you can rent a 120 sq. m. apartment for around EUR 2,700 per month.
Gross rental yields in St Petersburg range from a good rate of 7.49% for 65 sq. m. apartments, while bigger St Petersburg apartments earn less, with rental yields of around 4.80%.
TAXES AND COSTS
Last Updated: Mar 21, 2013
Rental Income: Rental income for nonresidents is taxed at the flat rate of 30%.
The rental income of foreign legal entities without a permanent establishment in Russia is subject to withholding tax, levied on gross rentals at 20%.
Effective Tax Rate on Rental Income | |||
| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 30% | 30% | 30% |
| Click here to see a worked example | |||
| Source: PWC Disclaimer | |||
Capital Gains: Capital gainsrealized by nonresidents for selling Russian property are taxed at a flat rate of 30%.
Effective Tax Rate on Capital Gains | ||
| Property Value | €25,000 | €2 million |
| Tax Rate | 60% | 60% |
| Click here to see a worked example | ||
| Source: PWC Disclaimer | ||
Inheritance:There are no inheritance taxes in Russia.Residents: Residents are taxed on their worldwide income at a flat rate of 13%.
BUYING GUIDE
Last Updated: Mar 21, 2013
According to Global Property Guide research, total roundtrip costs are between 20% and 25.5% of the property value, among the highest in Europe. Bulk of the cost goes to VAT at 18%. Brokerage fees amount to 2% for properties more than US$2 million, otherwise the fee is 5%. The buyer should be cautious when buying unfinished units.
LANDLORD AND TENANT
Last Updated: Nov 13, 2006
Russia’s rental market is pro-tenant.Rents: Rent is by agreement between the parties. However, rents can only be adjusted after one year.
Tenant Security: The tenant can only be evicted after non-payment of rent for six months. However, the tenant is given up to a year to amend the violation. The tenant can also cancel the contract anytime simply by giving a three months’ notice.
ECONOMIC GROWTH
Last Updated: Aug 07, 2012
Modest economic growth in 2012
Russia (GDP/cap. US$12,993) is the world’s largest country, with a land area greater than the rest of Europe and USA combined. Although the population has been declining, and currently stands at 142 million, Russia is the world’s ninth most populous country.Russia has the world's largest natural gas reserves, the 2nd largest coal reserves and the world’s 8th largest oil reserves. It is the world's leading natural gas exporter and the second leading oil exporter. In 2011, the country was the world’s second largest oil producer, next to Saudi Arabia.
Russia also has huge amounts of mineral reserves including platinum, nickel, aluminum, iron ore, copper gold and diamond. Oil, natural gas, metals, and timber account for more than 80% of Russian exports abroad. Revenues from oil and gas account for 50% of Russia’s budget.
In the second quarter of 2012, the Russian economy grew by a healthy 4%, but it was down from a GDP growth of 4.9% registered in the first quarter of 2012, according to the Federal State Statistics Agency (Rosstat).
Russia’s GDP is projected to grow by 4% in 2012, after annual growth of 4.3% in 2010 and 2011, according to the IMF. The European Bank for Reconstruction and Development (EBRD) is less optimistic, predicting real GDP growth of 3.1% in 2012, with the eurozone crisis and lower commodity prices are expected to dampen growth in the country.
The country fell deep into recession in 2009, with GDP contracting 7.8%, after global energy prices dropped. It was Russia’s deepest recession in 15 years, after robust economic growth from 1999 to 2008 (average GDP growth of 6.8% p.a.) thanks to booming energy and commodities revenues.
Unemployment never became a serious problem. In fact, Russia’s unemployment rate has been on a persistent downward trend, from over 9% in January 2010 to around 5.5% in June 2012. However, the unemployment rate in the country’s Federal Districts remains highly differentiated, varying from about 3.2% in Central Federal District to 13.2% in North Caucasus Federal District, according to Rosstat. The lowest city unemployment rates in June 2012 were in Moscow (0.8%) and St. Petersburg (1.1%).
In June 2012, the country’s annual inflation rate was 4.3%, far below the average inflation rate of 11% from 2003 to 2011. However, consumer price rises are expected to accelerate and could exceed the central bank’s target of 6% by end-2012, due to regulated tariff increases in July 2012 and the impact of the depreciation of the ruble on import prices.
Vladimir Putin was first elected Russia’s president in 2000. In the years of Vladimir Putin’s two-term presidency, and during his term as prime minister (2008-2012), the country’s booming economy and assertive foreign policy ensured him solid voter backing. But increasing corruption, the weak rule of law, and the formation of a Putin-connected oligarchy have combined to undermine his popularity among the politically-conscious middle-class and the elite. Despite his re-election as president in March 2012 on a massive majority for an extended 6-year term, the honeymoon between Putin and the ‘thinking elite’ is definitely over, and there are fears that the increasingly ‘crony capitalist’ power structure will weaken Russia’s dynamism and its attraction for foreign investors.
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